Not just unemployment but underemployment hurting big time

Amid one of the worst recessions in California history, the percentage of underemployed workers in Los Angeles County has doubled in the past year to 18 percent, according to a new study from a nonprofit group to be released Friday.

Underemployment takes a broader look at the economy than official state unemployment figures because it also includes those who have given up on looking for a job or have been involuntarily reduced to part-time employment.

Underemployment in the county grew from 8 percent in 2007 to 18percent last year, according to the "Ebbing Tides in the Golden State" report by the Economic Roundtable. In California it grew from 8 percent in 2007 to 17percent in 2008.

"We are going to see a lot of people in dire straits," said Daniel Flaming, president of the Economic Roundtable, a Los Angeles-based nonprofit that produced the study. "We are going to see more people seeking public assistance and we are going to see lots of people living in poverty who are cut off the public assistance rolls."

The 119-page report, which compared the impact of past recessions with the current one, estimated the number of homeless people in the county will rise from 73,702 in 2007 to 103,300 in 2011. It also projected the number of people living in poverty will increase to nearly 2 million in the county and 7 million statewide. For a family of three, the federal poverty level is about $14,000 a year in income.

Instead of making deep cuts in health and welfare programs, the report recommends the state increase taxes on alcohol and other "unhealthy consumer items" like sodas. It also recommends government officials collect taxes on the "informal economy" through better enforcement of labor and tax laws. The "informal economy," or businesses and employers that pay workers under the table or don't pay sales taxes, involves 16 percent of the county's labor force.

But a spokesman for county Supervisor Michael D. Antonovich said the report "is clearly more liberal propaganda designed to support higher taxes and more regulations for small businesses."

"This in turn means less jobs for Californians, which will mean longer economic difficulties," said Antonovich spokesman Tony Bell.

The California Endowment, a nonprofit foundation that focuses on improving the health of Californians, helped pay for the study because it is concerned about the link between growing poverty and poor health, said Will Nicholas, director of research at the endowment.

"If you have less income, then you are less likely to be able to live in a community where you have access to healthy foods, access to places to exercise and all of those environmental factors that make it easier for people to live healthy lives," Nicholas said.

The report comes as state lawmakers are considering a range of cuts and tax increases to close a $24 billion budget gap. As officials expect the state budget crisis to continue for another two to three years, the report's authors argued the state has insufficient tax revenues to pay for the level of public services expected in a state with a high standard of living and a large concentration of well-educated workers.

Gov. Arnold Schwarzenegger has proposed to eliminate the CalWORKS welfare program for 1.5 million people and the Healthy Families health insurance program for low-income children.

Flaming said these proposals are short-sighted and unwise and are likely to create a "wide swath of social damage that will cause far more lasting harm to the economy" than "intelligently designed tax increases." The report noted CalWORKS and Healthy Families benefit the state's economy through two-to-one leveraging of federal funds.

Flaming recommended one way for the county to generate more income is stricter tax enforcement.

For example, he said, many industries, such as restaurants, landscapers, builders and food preparation, underpay their taxes because they deal in cash.

"We're not doing a very good job of enforcing labor and tax laws in this state," Flaming said. "Los Angeles County's growth engine has been the informal economy since 1990."

The report also recommended property tax reforms to establish uniform rates of property taxation regardless of when properties were purchased. Flaming estimates the tax increases would raise $19billion annually.

But Bell said Proposition 13 has not crippled the state's revenue stream.

"Property tax revenues have gone from $6.4 billion in 1980 to $43 billion in 2006, a 600 percent increase - far higher than the combined rate of population growth and inflation over the same period," Bell said.